Nexus Between FDI, ODA and Economic Growth in Developing African Countries: A Systems Approach

The aim of this paper is to investigate the deterministic relationships between foreign direct investment, official development assistance and economic growth for a selection of 20 African countries, under dynamic economic circumstances, over nineteen years presented by the periods before, during, and after the global financial crisis (2000-2018; 2000-2006; 2007-2010; 2011-2018) within the African context. We adopted the two-step system GMM model as an estimation technique to analyze economic data sourced from the World Bank's WDI database. We found that a positive deterministic relationship exists between FDI and economic growth in all the time periods (2000-2018) and for each individual period (2000-2006; 2011-2018) for the sampled countries. However, there is a negative relationship between FDI and economic growth during the global financial crisis (2007-2010) period. Further, no significant deterministic relationship exists between ODA and economic growth for the periods and countries under review. Based on our findings, we recommend that African countries should design investment strategies, favorable to both local and foreign investors and to move away from official development aid reliance.